This news is not astonishing for me . Habit of manipulation in financial data is not happening in PSU banks only and neither it is the monopoly of PSU banks only, even private banks are using various tools to brighten their financial performance and to give a boost to their market capitalization in stock market. And the fun is that top RBI officials and Ministry of Finance , all are well aware of this dirty practice prevalent in banks for years and decades. It is fortunate or unfortunate that now fraud with financial data committed by private banks is also getting exposed.
In the past too, we have witnessed failure of top and well reputed bank like Global Trust Bank falling like playcards. We have seen many PSU banks victim of bad loans and then capital infusion by Government of India to save them from facing disaster. Almost every year or alternate year, GOI and RBI sound alerts on banks and issue caution to Chiefs to all banks to reduce NPA and ensure quality of lending. Unfortunately all these directives go unheard and filed in almirahs for the sake of record. Culture of hiding bad loans is as old as the era of Privatisation, Liberlisation and Globalisation.
Very soon people will realise that fraud and manipulation is the deep rooted normal practice in all banks and in all branches and hence should not be seen with suspicion or should not be seen as illegal and crime. When all are thieves in a group , stealing becomes a religious virtue. And if Government of India or CBI or anti-corruption bureau ever tries to nail corrupt officials of banks , Chiefs of these banks will forthwith approach regulating agencies to keep CBI and CVC away from ambit of the banks , otherwise they threaten that credit growth will go downwards causing growth of GDP to fall sharply. Administrative officials and judiciary persons also sit on banking cases for years and decades. There is no one to nail their heads.
There is no doubt that the news of underreporting of NPA by private banks will give temporary relief to PSU banks who have been singularly and consistently bearing the brunt of public criticism and government accusation on the issue of playing games with data as per their suitability .
The said news will also open the eyes of those who see bright future in investing in banking shares.
Market experts and reputed analysts who feel proud and elevated in predicting good health of some banks or the other will also get exposed very soon. Investors betrayed and cheated by such financial analysts who used to predict gain in banking shares will also now be doubly cautious while investing in banking shares based on recommendations of these clever experts who play the tune of their mentors.
Fact is that all banks in general and PSU banks in particular are sitting on explosive of bad loans and there is no doubt that either these banks will collapse due to their perpetual sins or Government will have to provide stimulus package to them to salvage image of the government and the country. There is no doubt to me that RBI and Government of the past willfully and under their strategy promoted bad culture in banking sector God bless us.
I have been pointing out this truth of banks since long, but the matter was never taken seriously by RBI or the then government. When NPA level of banks crossed one percent for the first time , there used to be debate and discussion in corridors of banks , RBI and political parties . The then Governor of RBI , Mr. Suba Rao had also promised to bring NPA down the level of 1 percent by hook or by crook during his tenure. Mr. Raghuram Rajan also did a lot to stop rising trend of NPA to a great extent.
Now Gross NPA of many banks have crossed 10 percent and even 20 percent in some banks. Still government of the day is not as much serious as it should be. Even now steps taken by the government are not adequate to cure the cancer of bad loans. RBI in fact failed to perform its duty during last two decades due to some reason or the other. Before 1991 , RBI used to carry out audits of big branches , medium branch and some small branches also to check the banking operation from various angle of consideration. But slowly and gradually they reduced the number of audits and reduced to negligible numbers and in return they gave unregulated freedom to PSU banks as well as private banks which has resulted in aggravating the sickness of banks.
Government has now come out with an ordinance but it will fail in its motto. Though Chiefs of a few banks have appreciated this step to please their bosses in ministry, there is no merit in the ordinance .
I however feel that current central government has taken many steps to reduce load of bad loans in banks since its coming to power in the year 2014. However in my opinion, government has still not taken adequate step to strike at the root causes which are responsible for perpetual rise in bad loans in almost all banks and which create a culture of creation of bad loans and then concealing the same to brighten their financial performance. Government has come out with many
Window dressing in deposits in advance and in recovery are not new in banking. Despite all circulars and government guidelines not to resort to window dressing almost all Chiefs and top officials in banks have been consistently using Windows dressing to brighten not only the balance sheet if their banks but also their careers.
Many executives of banks who retired safely by committing many types of frauds and manipulation with financial data will have to be punished to send a clear message to all working officials. It is pity that despite clear instructions to declare all bad loans by March 2017, many banks have willingly avoided it's compliance. After all it is a matter of their careers, not that much of safety of banks or that of people of India who trust them or that of taxpayers money which is frequently wasted in capitalization of sinking banks every year.
As long as government is busy in analysing the nature of symptoms appearing on banking body and applying various creams on the surface of the body, there is no reason to believe that internal health of banks will ever improve. God bless us.
All is not well in Public Banks
Yes Bank under-reported bad loans in March 2016, says annual report disclosure _13 May 2017
Yes Bank reports its bad loans (NPAs) classification varied with RBI’s to the tune of Rs4,176 crore at the end of March 2016
Mumbai: Yes Bank Ltd said on Friday that its non-performing asset (NPA) classification as of March 2016 varied from that of the Reserve Bank of India (RBI) to the tune of Rs4,176 crore.
Yes Bank had reported gross bad loans of Rs748.98 crore at the end of March 2016 compared with Rs4,925 crore assessed by the central bank.
Yes Bank shares lost 6.04% to close at Rs1,483.85 after the lender disclosed this information in its annual report for financial year 2017 released on Friday. The benchmark Sensex shed 0.21%.
Government perhaps does not understand or is pretending as if they are unaware of the fact that bankers are habituated to conceal bad loans and they do it for years .
It never happens when a banker finds hurdles in filing a case against defaulters before it is declared as NPA. They avoid taking legal action as far as possible.
Fact is that they do not allow juniors to declare a bad account as NPA because as soon as it is done , they will have to initiate steps for recovery. And they will never commit a blunder of filing a case before 90 days or before it is declared NPA.
Because if an account goes bad within 90 days , sanctioning officer will be exposed.
As such I think FM is wondering in dreamland if he thinks that by ordinance promulgated by government, bank will feel comfortable in recovery of bad loans. Rather NPA will continue to stink under carpet and every executive will get promotion by treating bad accounts as good account and by avoiding all action against guilty and Corrupt Bank officers or against wilful defaulters to safeguard bankers who have been benefitted by direct or indirect bribe given by defaulting borrowers at time of sanction.
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